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Difference Between Mortgage Banker and Broker
While shopping for a home loan, the prospective buyer may either get assisted by a mortgage banker or broker, where both assist in preparing the right mortgage; however, the mortgage banker works for lending institutions like banks, etc., from whom the loan is obtained, and the mortgage broker is an intermediary working with many of the financial institutions arranging the right mortgages between borrower and lender based on the individual needs and expectation of the borrower.
Although both helped procure the right mortgage for a homebuyer, the basic difference lies in that mortgage bankers represent a bank or other specific financial institution that lends money. In contrast, the broker is not bound to any one lender or financial institution but is free to shop around for a mortgage based on the borrower's individual needs.
In the course of this article, we will try to analyze some of the fundamental differences between bankers and brokers that might help a borrower make the right choice while seeking a home loan.
Mortgage Banker vs Broker Infographics
Let's see the top differences between Mortgage Bankers vs Brokers.
Key Differences
- The mortgage banker represents the direct lender, whereas the broker merely brokes the deal between the borrower and the lender.
- Mortgage bankers originate mortgages in their names and with their funds, whereas mortgage brokers facilitate mortgage origination for other financial institutions they don’t represent.
- While a mortgage banker works for a financial institution, the employer's interests are tied down. In contrast, a broker works independently and, in a way, represents the borrower's interests more than the lender.
- A mortgage broker might try to earn higher premiums by leading borrowers toward higher-priced loan options in some cases. In contrast, a mortgage banker works within the options afforded by one specialized lender.
- Earlier, mortgage brokers used to offer greater flexibility in choosing a loan by working with a variety of lenders. Still, regulatory changes have slowly helped standardize loan programs in a way that makes mortgage bankers look like a more reliable option.
- A mortgage broker can only try to broker the deal between a lending institution and the borrower but can do little to sort out any personal issues in loan application approval. In contrast, a mortgage banker has the power to approve or reject a loan application at their discretion while working for the lending institution.
Mortgage Banker vs Broker Comparative Table
Basis for Comparison | Mortgage Banker | Mortgage Broker |
---|---|---|
Definition | As per the Mortgage Bankers Association, a mortgage banker is “an individual, firm or corporation that originates, sells or services loans secured by mortgages.” | The National Association of Mortgage Brokers defines a broker as “an independent real estate financing professional specializing in the origination of mortgages” |
Level of Flexibility | Employed by banks, credit unions, or savings and loan associations, they offer a low level of flexibility by helping borrowers find the best possible loan options provided "only" by that institution. | Mortgage brokers understand the needs of borrowers to find the best possible loan option provided by any number of lending institutions, thus offering a higher level of flexibility in choice. |
Level of Reliability | A higher level of reliability working with a specialized lending institution. | The relatively lower level of reliability works independently to spot the right mortgage opportunities. |
How Do They Earn? | Mortgage Bankers typically work on a salary with the lending institution, along with occasional performance-based bonuses or incentives. | Mortgage brokers work for their commission or a flat fee in some cases, usually a percentage of the loan value. |
Conclusion
Choosing from a mortgage banker vs. broker while looking for a home loan requires careful consideration of individual needs. Whereas one can look for greater flexibility by going along with a broker who can compare the loan options provided by a credit union and a bank, for instance, a mortgage banker would offer greater reliability by working through every aspect of the mortgage process and loan packaging to render the best service possible.
If one must go along with a mortgage broker, it should be someone who has passed the state licensing exams and is well aware of the financing rules. It would reduce the possibility of being charged exorbitantly by a broker or ending up with a less than desirable loan option that barely fulfills one’s needs.
Every aspect of the question must be carefully weighed to arrive at any conclusion and avoid any possible issues with loan repayments later.
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This has been a guide to Mortgage Banker vs Mortgage Broker. Here we discuss the top differences between a mortgage banker and broker along with infographics and a comparative table. You may also have a look at the following articles –